The former Arsenal trainee, who is out of contract at Selhurst Park, is reportedly a target of manager Steve Bruce who is keen to bolster the squad numbers at St Andrew's during the close season.
Gray, who misses out on The Eagles play-off final against West Ham this weekend having been sent off in the semi final 2nd leg at Sunderland, spent two months on loan at Cardiff and had trials with Charlton, Leeds and Blackburn Rovers last season but none of those clubs were prepared to pay the £750,000 fee that Palace were reported to have wanted for the pacey left winger.
However, Gray, who Bruce would know well from his time as manager at Palace, will now be available on a free transfer and at 24 years old no compensation fee would have to be paid.